Russian Grain Exports Continue to Surge Russian

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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY

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Date: 11/2/2011 GAIN Report Number: RS1148

Russian Federation Post: Moscow

Russian Grain Exports Continue to Surge Report Categories: Grain and Feed Approved By: Levin Flake Prepared By: Yelena Vassilieva Report Highlights: As a result of higher grain production, weaker export competition, and strong foreign demand, Russia’s grain exports have soared during the first 3 months of the 2011/12 marketing year, and are estimated at nearly 10 million tons during this period. Overall grain exports are forecasted at 21.7 MMT, including 19.0 MMT of wheat, 1.8 MMT of barley, and 0.6 MMT of corn. Some Russian officials have threatened to impose export tariffs if exports exceed 23-24 MMT (which would be a record) in MY 2011. Winter sowing for 2012 production is continuing, and the Ministry of Agriculture estimates winter sown area (primarily grain) will be up more than 10 percent from last year.

Production: FAS Moscow forecasts total grain crop at 90.2 MMT, including 56.0 MMT of wheat, 16.6 MMT of barley, 6 MMT of corn, and 11.6 MMT of other grains and legumes. According to Russian top officials, grain production in 2011 may reach 90-92 MMT. The final data will be published only in the beginning of CY 2012. The recent Agricultural Ministry’s (MinAg) harvest report shows that Russian grain crop may exceed 90 MMT this year. Harvest Progress According to the MinAg, as of October 25, 2011 Russia harvested 95 MMT from 41.1 million hectares that is 96 percent of grain sown area (Note: Harvest progress data is in bunker weight, which is usually 5-8 percent higher than the clean weight that is reported as final crop in Russia). By crops the harvest progress is the following: 58.9 MMT of wheat was harvested from 24.7 million hectares (98 percent of sown area). The average wheat yield is 2.38 metric tons (MT) per hectare, higher than in 2010 (1.98 MT/ha), but lower than in 2009 (2.41 MT/ha); 17.6 MMT of barley was harvested from 7.7 million hectares (99 percent of sown area). The average yield is 2.29 MT/ha, higher than in 2010 (1.79 MT/ha), but lower than in 2009 – 2.44 MT/ha); 3.5 MMT of corn were harvested from 0.8 million hectares (49 percent of sown area). The average yield is 4.37 MT/ha, or higher than in 2010 (2.28 MT/ha) and in 2009 (3.5 MT/ha). The corn crop harvest is in the full swing in the South of European Russia; Rice crop this year may be lower than in 2010. As of October 25, 2011 Russia harvested 836,000 MT from 155,000 hectares (85 percent of sown area), with the average yield of 5.4 MT/ha. On the same date in 2010 Russia harvested 1.1 MMT of rice with the average yield of 5.75 MT/ha; In 2011 Russia will more than double production of buckwheat, one of Russia’s major food crops. Buckwheat retail prices tripled in MY 2010, and Russian farmers increased area sown to buckwheat in 2011, and favorable weather increased yields from 0.67 MT/ha in 2010 to 0.97 MT/ha in 2011. As of October 25, 2011 farmers harvested 738,000 MT of buckwheat from 759,000 hectares (90 percent of sown area). Winter Sowing As of October 25, 2011, Russian farmers planted 14.9 million hectares to winter crops, mostly grains, and due to favorable weather and good moisture, winter planting will continue through the first week of November. The Minister of Agriculture Yelena Skrynnik reported that Russian farmers will plant at least 17 million hectares with winter crops; or 2 million hectares more than in the fall of 2010. Yields of winter crops could benefit as a result of increased application of mineral fertilizer. According to the Ministry of Agriculture, as of October 2011 farmers’ stocks of mineral fertilizer were 2.32 MMT (active substance), 0.13 MMT more than in the fall 2010. However, farmers continue to complain about permanently increasing inputs prices, especially fuel and lubricants. They report that unless the government administratively curbs fuel prices, as it did in the spring 2010 and 2011, the spring field work may be under threat.

Trade: Given the good grain crop, and the speed of grain exports in July-September, 2011, FAS/Moscow grain exports forecast has been increased to 21.7 MMT, including 19.0 MMT of wheat, 1.8 MMT of barley, 0.6 MMT of corn, and almost 0.3 MMT of other grains and legumes and their products. Grain Exports in July - September 2011 The grain export ban discontinued on July 1, 2011, and since then and through September 2011, Russia exported over 9.7 MMT of grain and grain products. In July 2011 Russia exported 2.6 MMT (mostly wheat from carry-over stocks), and August grain exports exceeded 3.3 MMT, and in September reached a record of 3.8 MMT. Wheat exports in July – September totaled 8.5 MMT. Russia exported wheat to 30 countries, and the top ten recipients were Egypt (2,359,810 MT), Turkey (1,176,190 MT), Italy (432,470 MT), Kenya (404,420 MT), Yemen (335,380 MT), Spain (324,740 MT), Israel (323,080 MT), Azerbaijan (248,710 MT), Georgia (217,900 MT), and Djibouti (206,200 MT). Russia’s exports of wheat flour in these three months were 120,000 MT, or grain equivalent of 170,000 MT. Barley exports in July – September reached 1.0 MMT. Barley was exported to over 10 countries, and almost 67 percent (662,040 MT) of Russia’s barley were shipped to Saudi Arabia. Other major recipients of Russian barley were Israel (74,810 MT), Sudan (48,430 MT), and Iran (41,830 MT). In July – September 2011 Russia also exported 50,000 MT of corn, 23,000 MT of rye, and 7,900 MT of rice. Chart 1. Russia’s Grain Exports in MY 2010, and in July – September 2011

Grain exports in October – December 2011 Industry analysts forecast that grain exports in October – December 2011 will be lower than in July – September 2011 due to several factors: Export competitor prices have become more competitive against Russian grain; In September 2011, the US dollar was strengthening to ruble, stimulating Russian exports, and reached its peak of approximately 32.6 rubles per $1 by the end of September. In October, however, the exchange rate stabilized around 32 rubles and began decreasing in the end of October; According to industry analysts, stocks of wheat at the farms of the Southern European Russia (closest to ports provinces) have decreased, and incentives to export grain weakened. Farmers in Siberia have good grain crop and high carry-over grain stocks, but the cost of shipping their grain to the ports is very high, and limits their ability to sell grain for exports. Grain traders have already accumulated enough grain to continue exports in November, and, according to SovEcon, shipped up to 3.4 MMT of grain in October, but the total grain exports in the 4th quarter of 2011 will not repeat July-September success; In the end of November, Russia will enter a season of weather problems in most of Russia’s ports (ice in Volga-Don, storms in the Black sea) and this negative-for-exports period, including long Christmas holidays, may last through February 2012. (Please see Chart 2 below for average seasonality of Russian wheat exports). Chart 2. Seasonality of Russia’s Grain Exports (2002-2011 Monthly Average)

Note: - In February 2008 Russia introduced temporary grain export duties until July 2008; - in August 2010 Russia imposed an export ban that was in force until July 1, 2011

Policy: The Russian government has stated that it is comfortable with this year’s grain production, and the present pre-election campaign has diverted its attention from farmers’ policy. Thus, the government decisions on legislation in the agricultural sphere have been moved to the end of CY 2011. This legislation will involve the development of new rules for grain interventions, the use of warehouse receipts, grain quality control, and grain export control. In the end of September, the First deputy Prime Minister Viktor Zubkov reported that if Russian grain exports in MY 2011 exceed 23-24 MMT (which would be a record), then the government will impose some export restrictions. The Ministry of Economic Development, which is responsible for development of economic and trade policy, has theoretically supported this idea, but has not developed any draft legislature for implementation of these measures. Marketing: Prices Due to the increase of the dollar exchange rate to Russian ruble from 28.87 rubles in the end of August, 2011 to 32.59 rubles in the end of September, wheat prices in rubles were decreasing slower than in US dollars. The gap between elevator gate prices in the European Russia, where there is close access to export ports, and prices in Siberia, remains very large. Chart 3. Grain Prices, European Russia, EXW, July 1 – October 21, 2011, US Dollars

Sourc

e: ProZerno Chart 4. Grain Prices, European Russia, July 1 – October 21, 2011, EXW, Rubles

Source: ProZerno Chart 5. Russia: Price of Wheat of Milling Quality, Class 4, by Regions, Rubles

Source: ProZerno Production, Supply and Demand Data Statistics : PSD, Wheat, 1,000 Metric Tons, Area in 1,000 Hectares 2009/2010

2010/2011

2011/2012

Market Year Begin: Jul 2009 USDA Official New Post

Market Year Begin: Jul 2010 USDA Official New Post

Market Year Begin: Jul 2011 USDA Official New Post

Wheat Russia

28,698 10,743 61,770 164 164 0 72,677 18,556 18,556 16,800 22,800 39,600 14,521 72,677

Area Harvested Beginning Stocks Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution

28,700 10,479 61,770 164 164 0 72,413 18,556 18,556 16,800 22,800 39,600 14,257 72,413

26,614 14,521 41,508 89 89 0 56,118 3,983 3,983 16,000 22,600 38,600 13,535 56,118

21,710 14,257 41,508 100 100 0 55,865 3,950 3,950 16,000 22,600 38,600 13,315 55,865

25,679 13,535 56,000 200 200 0 69,735 18,000 18,000 16,000 22,600 38,600 13,135 69,735

26,000 13,315 56,000 100 100 0 69,415 19,000 19,000 15,500 22,600 38,100 12,315 69,415

1000 HA, 1000 MT, MT/HA

PSD, Barley, 1,000 Metric Tons, Area in 1,000 Hectares Barley Russia

Area Harvested Beginning Stocks

2009/2010

2010/2011

2011/2012

Market Year Begin: Jul 2009 USDA Official New Post

Market Year Begin: Jul 2010 USDA Official New Post

Market Year Begin: Jul 2011 USDA Official New Post

9,094 3,813

7,750 3,637

7,214 2,395

4,960 2,238

7,960 1,386

8,000 1,188

17,881 8 13 0 21,702 2,657 2,086 12,150 4,500 16,650 2,395 21,702

Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution

17,900 8 8 0 21,545 2,657 2,086 12,150 4,500 16,650 2,238 21,545

8,350 408 400 0 11,153 267 800 5,500 4,000 9,500 1,386 11,153

8,350 400 400 0 10,988 300 1,000 5,500 4,000 9,500 1,188 10,988

16,500 200 200 0 18,086 1,600 1,600 9,800 4,500 14,300 2,186 18,086

16,600 200 200 0 17,988 1,800 1,500 9,800 4,500 14,300 1,888 17,988

1000 HA, 1000 MT, MT/HA

PSD, Corn, 1,000 Metric Tons, Area in 1,000 Hectares 2009/2010

2010/2011

2011/2012

Market Year Begin: Oct 2009 USDA Official New Post

Market Year Begin: Oct 2010 USDA Official New Post

Market Year Begin: Oct 2011 USDA Official New Post

Corn Russia

1,365 254 3,963 32 32 0 4,249 427 427 3,200 500 3,700 122 4,249

Area Harvested Beginning Stocks Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution

1,100 287 3,950 50 50 0 4,287 427 427 3,200 500 3,700 160 4,287

1,416 122 3,075 200 200 0 3,397 35 35 2,800 400 3,200 162 3,397

1,020 160 3,075 150 150 0 3,385 55 55 2,800 400 3,200 130 3,385

1,743 162 6,000 50 50 0 6,212 600 600 4,500 500 5,000 612 6,212

1,600 130 6,000 50 50 40 6,180 600 600 4,500 500 5,000 580 6,180

1000 HA, 1000 MT, MT/HA

PSD, Rye, 1,000 Metric Tons, Area in 1,000 Hectares Rye Russia

2009/2010

2010/2011

2011/2012

Market Year Begin: Jul 2009 USDA Official New Post

Market Year Begin: Jul 2010 USDA Official New Post

Market Year Begin: Jul 2011 USDA Official New Post

Area Harvested Beginning Stocks Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution 1000 HA, 1000 MT, MT/HA

2,147 312 4,333 0 0 0 4,645 12 11 825 3,500 4,325 308 4,645

2,150 297 4,300 0 0 0 4,597 12 11 825 3,400 4,225 360 4,597

1,757 308 1,642 150 150 0 2,100 0 10 75 1,800 1,875 225 2,100

1,380 360 1,650 150 150 0 2,160 0 0 100 1,750 1,850 310 2,160

1,623 225 3,000 0 0 0 3,225 10 10 100 2,900 3,000 215 3,225

1,800 310 3,200 0 0 0 3,510 30 30 250 2,980 3,230 250 3,510

PSD, Oats, 1,000 Metric Tons, Area in 1,000 Hectares 2009/2010

2010/2011

2011/2012

Market Year Begin: Jul 2009 USDA Official New Post

Market Year Begin: Jul 2010 USDA Official New Post

Market Year Begin: Jul 2011 USDA Official New Post

Oats Russia

3,374 499 5,401 0 0 0 5,900 3 4 4,000 1,500 5,500 397 5,900

Area Harvested Beginning Stocks Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution

3,000 581 5,400 0 0 0 5,981 3 4 4,000 1,500 5,500 478 5,981

2,895 397 3,218 0 0 0 3,615 5 5 2,050 1,400 3,450 160 3,615

2,250 478 3,220 0 0 0 3,698 0 0 2,000 1,400 3,400 298 3,698

3,233 160 5,000 0 0 0 5,160 5 5 3,400 1,500 4,900 255 5,160

3,300 298 4,600 0 0 0 4,898 0 0 3,200 1,400 4,600 298 4,898

1000 HA, 1000 MT, MT/HA

PSD, Millet, 1,000 Metric Tons, Area in 1,000 Hectares Millet Russia

2009/2010

2010/2011

2011/2012

Market Year Begin: Jul 2009 USDA Official New Post

Market Year Begin: Jul 2010 USDA Official New Post

Market Year Begin: Jul 2011 USDA Official New Post

Area Harvested Beginning Stocks Production MY Imports TY Imports TY Imp. from U.S. Total Supply MY Exports TY Exports Feed and Residual FSI Consumption Total Consumption Ending Stocks Total Distribution

522 0 265 0 0 0 265 0 0 90 175 265 0 265

250 0 265 0 0 0 265 0 0 90 175 265 0 265

521 0 131 0 0 0 131 0 0 5 126 131 0 131

170 0 130 0 0 0 130 0 0 5 125 130 0 130

842 0 700 0 0 0 700 0 0 400 300 700 0 700

250 0 400 0 0 0 400 10 10 245 145 390 0 400

1000 HA, 1000 MT, MT/HA

PSD, Rice, Milled, 1,000 Metric Tons, Area in 1,000 Hectares Rice, Milled Russia Area Harvested Beginning Stocks Milled Production Rough Production Milling Rate (.9999) MY Imports TY Imports TY Imp. from U.S. Total Supply

2009/2010

2010/2011

2011/2012

Market Year Begin: Jan 2010 USDA Official New Post

Market Year Begin: Jan 2011 USDA Official New Post

Market Year Begin: Jan 2012 USDA Official New Post

182 49 590 908 6,500 240 240 2 879

175 49 590 908 6,500 240 240 3 879

202 55 690 1,062 6,500 160 160 0 905

202 55 690 1,062 6,500 160 160 0 905

210 80 725 1,115 6,500 130 130 0 935

210 80 700 1,077 6,500 130 130 0 910

MY Exports TY Exports Consumption and Residual Ending Stocks Total Distribution 1000 HA, 1000 MT, MT/HA

154 154 670 55 879

154 154 670 55 879

125 125 700 80 905

125 125 700 80 905

150 150 700 85 935

150 150 680 80 910